Europe Markets: European stocks end sharply lower as U.S.-China spat ratchets up

European stock markets closed in the red Wednesday, as traders fretted over the fallout from a potential global trade clash between the U.S. said it plans to hit Chinese goods with another $200 billion in tariffs.

What are markets doing?

The Stoxx Europe 600 index SXXP, -1.26% slumped by 1.3% to end at 381.40, sufferings its biggest one-day percentage loss since June 25.

The euro EURUSD, -0.3746% fell to $1.1724 from $1.1745 late Tuesday in New York. The pound GBPUSD, -0.3917% traded at $1.3236, down from $1.3275 on Tuesday.

What is driving the market?

Traders headed for the exit as trade-war fears again entered center stage. The White House late Tuesday said it would assess 10% tariffs on a further $200 billion in Chinese goods, a move seen as deepening the rift with Beijing and sending a message to other trading partners that the U.S. won’t back down in a trade fight. The U.S. last week hit Beijing with levies on $34 billion in goods, and Beijing retaliated with tariffs of the same amount.

A final decision on the products to be hit with the new tariffs is expected after a consultation period in late August.

China’s Ministry of Commerce said in a statement that the new levies are “totally unacceptable” and that the behavior is hurting not just China, but the whole world.

What are strategists saying?

“With escalating trade tensions between the world’s two largest economies presenting a significant threat to global economic growth and stability, there are no winners. Investors are likely to maintain a cautious stance for the rest of the trading week with global sentiment expected to remain fragile,” said Lukman Otunuga, research analyst at FXTM, in a note.

“This cautious tone is already reflected in global equity markets this morning with Asian and European stocks tumbling lower. Wall Street could be poised to open lower this afternoon as the risk-off sentiment encourages investors to offload riskier assets for safe-haven investments,” he added.

Read: Dow falls after U.S. unveils new China tariffs

Stock movers

Burberry Group PLC shares BRBY, -4.05%BURBY, -4.82% lost 4.1% after the luxury-goods retailer said dampened demand among tourists in Europe led to slower like-for-like sales in the first quarter.

Indivior PLC shares INDV, -29.52% plunged 30% after the drugmaker issued a profit and sales warning for 2018, citing negative market developments in the U.S.

Sky PLC SKY, -1.84% fell 0.5% after 21st Century Fox Inc. FOXA, -3.82% raised its takeover bid for the British broadcaster, valuing it at £24.5 billion ($32.5 billion), heating up a bidding war with Comcast Corp. CMCSA, +1.89%